What is the coupon of bond b

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A Government has issued two bonds: Bond A will pay a coupon of £100 on 1 January next year, and which will then pay coupons on 1 January every year thereafter (forever), with the coupon increasing by 3% every year. Bond B will pay a fixed annual coupon each year (forever), with the coupon being paid on 1 January each year. Assume that the appropriate discount rate for both bonds is 8% in annualized terms. If it is now January 2, and both bonds have the same current price, what is the coupon of Bond B?

Reference no: EM132775834

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